Oil markets were split on Tuesday, with U.S. crude still carrying momentum from Friday’s gains due to a holiday on Monday while international Brent prices eased.
U.S. West Texas Intermediate (WTI) crude futures were at $62.31 a barrel at 0740 GMT, up 63 cents, or 1 percent, from their last settlement.
A holiday in the United States on Monday meant that Friday’s gains were being pushed into Tuesday for WTI, traders said.
Ongoing supply reductions from Canada to the United States due to pipeline reductions were supporting WTI, traders said.
Outside North America, Brent crude eased on the back of a dip in Asian stocks and a stronger dollar, which potentially curbs demand as it makes fuel more expensive for countries using other currencies domestically.
Brent crude futures were at $65.54 per barrel, down 13 cents, or 0.2 percent, from Monday’s close.
The opposing price direction of the two main crude benchmarks had reduced WTI’s discount to Brent, to around $3.30 per barrel on Tuesday, down from over $7 in late 2017.
Overall, oil markets remain well supported due to supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), which started last year in order to draw down excess global inventories.
OPEC Secretary-General Mohammad Barkindo said on Monday the organization registered 133 percent compliance with agreed output reduction targets in January.
Global oil demand for 2018 is estimated to grow 1.6 million barrels per day due to an “encouraging environment”, Barkindo added.
“OPEC and Russia continue to support the production cuts that are due to expire at the end of this year, and they assure markets that there will be an orderly ramp up of production once the cuts expire,” said William O‘Loughlin, analyst at Rivkin Securities.
Saudi Arabia – not least in an attempt to give the planned listing of its state-owned oil giant Saudi Aramco – a boost, is keen for Russia and other producers to keep withholding supplies to prop up prices.
However, soaring U.S. production is threatening to erode OPEC’s efforts.
Last week, the amount of U.S. oil rigs drilling for new production rose for a fourth straight week to 798, in an indication that U.S. crude output, already at a record 10.27 million bpd, may rise further.
The United States late last year became the world’s second biggest oil producers, only slightly behind Russia and ahead of top exporter Saudi Arabia.
“If it was astonishing that they (the United States) ramped up production in a $50 per barrel market, what makes the market think they won’t carry on when we are in the mid $60s,” asked Matt Stanley, a fuel broker at Freight Investor Services in Dubai.